The organisation's share of the home loan market is also lower
AFG brokers’ total lodgement volume for the first quarter of the 2024 financial year was $20.9 billion, down 6.9% on the final quarter of FY23 and down 2.7% on the same period last year, with the latest results fuelled by New South Wales, which saw a 7% drop on the prior quarter and 3.6% from this time last year.
Also driving the results were Victoria, which fell 7.3% on last quarter and 4.9% on Q1FY23, Queensland, down 2.2% on the prior quarter and down 0.9% from last year, and Western Australia down 12.2% on last quarter and down 1.7% compared to the same time last year.
In South Australia, conditions were slightly different, with volumes down 8.5% on the prior quarter but up 2.8% on the same period last year. In the Northern Territory, volumes lifted 19% on the prior quarter but were 2.4% lower than in Q1 FY23.
“Our data suggests that the interest rate pause has meant many borrowers expecting further rate rises may have run their course, with those choosing standard variable rate products now at their highest level ever, at 81.2%,” said AFG CEO David Bailey (pictured above). “Those choosing fixed rates have dropped to a low 4.8%, which is the second lowest percentage recorded since we commenced releasing our Index.”
And in a first positive move in six quarters, upgrader volume climbed 1% to 38%.
“Whilst our brokers remain busy assisting clients, the overall market remains a little choppy compared to the heightened activity we saw during the COVID period,” Bailey said. “The positives, however, include the fact that the housing market continues to demonstrate resilience as we head into the traditional spring buying season, with constraints on supply likely to keep house prices high and volumes lower.”
Investment loan volumes lifted 1% to 30% but were still below longer-term averages, while first-home buyers were also active, up 1% to 12% of the market.
Refinance volumes dropped by 3% to 30%, largely due to the withdrawal of cashback offers from the market. This shift also saw volumes at the major lenders decline, as they, too, returned to more rational pricing.
Non-major lenders continued to operate in a tough environment. AFG Home Loans’ market share sat at 5.04%, down from 7.95% the same time last year, and slightly below last quarter’s share of 5.4%.
“Despite the fact that we are gradually seeing non-major lenders become more competitive, underlying cost of funds relative to current market rates to customers remain challenging,” Bailey said. “The removal and reduction of cashback offers has translated into flows of business away from the big four and their subsidiaries, with their market share down by 2.9% to 57.5%.
“Repaying the term funding facility and increasing level of competition for deposits has meant the major lenders are stepping back from their ‘market share at any cost’ push and are withdrawing sub-economic pricing. Time will tell whether the majors hold their nerve to favour better financial returns on their home loan portfolios over what has been demonstrated as a futile chase for market share.
“When looking at where the movement has been, the major lenders’ share of the investment market dropped by 5.5% for the quarter. Their share of the refinance market dropped by 6.4% and upgraders by 1.2%. The only category where they made gains was with first-home buyers, recording an uptick of 2.6% with new home buyers.”
The national average loan size increased by $3,000, with Victoria recording the most noticeable increase at $13,000, followed by Queensland, with a gain of $9,000.
NSW, however, saw a decline of $10,000, which at just under $718,000, represented the lowest average loan size since the second quarter of FY21. Reductions in the average loan size were also recorded in the Northern Territory, which was down by $2,600, South Australia, down by $9,000, and Western Australia, by $4,000, AFG reported.
The national LVR rose by 0.2% to 65.5%.
“The slowdown last quarter has meant lender turnaround times down improved marginally, down from 17.4 days to 17.3 days,” Bailey said.
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